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Treasures of the orient
Treasures of the orient
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Treasures of the orient

14/12/2016

Brian Rooney

Brian Rooney

Regional Head of Sales, Alternatives

BNP Paribas Securities Services

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Brian Rooney of BNP Paribas explores the opportunities and challenges for raising capital in Asia and Europe

Europe is open for Asian hedge fund managers to raise investment. The positives outweigh the current challenges, and the continent offers plenty of opportunity for those prepared to adopt a well-constructed, targeted campaign. This was the main takeaway for Asian asset managers who attended the Fund Structures and Capital Raising: Opportunities & Challenges event hosted jointly by BNP Paribas, Carne Group and Dechert in Hong Kong.

In a series of sessions, panelists looked at the landscape for marketing funds in Europe, the structures available, the Asian perspective on the major trends in the industry and the best approaches to raise capital in the current environment.

The European landscape

The opening session offered views on the different strategies and challenges for marketing funds in Europe. Ian Lynch, Global Head of Hedge Fund Services, BNP Paribas Securities Services, set the scene by highlighting the trend in Europe towards using onshore products. “We are certainly seeing a trend whereby managers of traditionally offshore structures are migrating onshore,” said Lynch. “Europe has the second largest funds industry in the world and a sizeable institutional and retail investor landscape. Some institutional investors cannot allocate their capital into offshore structures for a variety of reasons. As such, a move onshore by managers can result in improved capital raising opportunities.”

The panel explored European investors’ preference for regulated product and the level of popularity of locally managed funds. Lindsay Trapp, Associate, Financial Services at Dechert, suggested that this is being driven by an attraction to European domiciled funds, increased accessibility, and the fact that some institutions require regulated funds under their mandate.

Christopher Day, Managing Director, Carne Group, picked this up with his thoughts on the current difficulties selling product, pointing out that alternative UCITS were growing faster than any other category of UCITS.

Facing up to regulation

UCITS is a well-known and popular structure that provides a passport to the entire European market. One benefit of using the structure is that a manager can market to all retail and institutional investors. However, regulations around UCITS mean it is not possible to replicate a hedge fund within the structure, on which Lynch advised that “you are not very likely to be able to create a clone”.

“If you wish to replicate your hedge fund strategy using a UCITS wrapper, this will be more like a cousin than an identical twin of the strategy,” he added. There are other structures, such as alternative investment funds (AIFs), that provide an easier regulatory structure, but there are restrictions on who they can be sold to.

The Asian angle

The second panel session brought together local experts to provide their insights into what Asian clients are interested in and what the obstacles are. An initial challenge is setting up the fund to attract the institutional investors from Asia. In order to build scale, these may be needed to expand into other European markets. Day pointed out the difficulty in persuading investors of one’s business credentials. “Performance is one element, but nowadays there is a lot more on the operational side that needs to be aligned,” he suggested. Regulation requires procedures and policies to be in place, which Day believes to be a good thing, but feels that there is a need to “look at the standards in the jurisdiction that you are in and then go that extra mile”.

Angelyn Lim, Partner, Financial Services, Dechert, suggested regulation is changing behavior and that the big investment that funds now need to make is in compliance. Equally, she has observed a new trend in institutionalising from the top. Lim sees an increase in the number of independent directors, who represent a key part of the governance ecosystem, and at the same time an improvement in their quality.


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